Frankfurt am Main, 28 January 2014. Germany’s mid-market segment for management buyouts made no headway in 2013. The sector recorded fewer transactions compared with the preceding year and a lower overall transaction value than in the two previous years. The number of primaries – buyouts in which a financial investor invests in a company for the first time – is stable on a low level, and their share of the market has remained unchanged, which shows that financial investors are finding new investment opportunities even in weaker market phases and are by no means making the market themselves by selling companies to each other (secondaries). It also shows that the German private equity market still has a ways to go, compared with other economies. In France and the UK, for example, secondaries make up a considerably larger share of the market than in Germany, where one transaction in three is a secondary buyout. This is documented by current data and an assessment of older data (2004 to 2013) released today by Deutsche Beteiligungs AG. The sector dissemination has also remained nearly constant over the past ten years. The most attractive targets are traditional mid-market industries: automotive suppliers and mechanical engineering and plant construction companies most frequently find their way into private equity portfolios; together with industrial service providers and chemical companies, these have accounted for 40 percent of all transactions since 2004.

Deutsche Beteiligungs AG (DBAG) and FINANCE magazine have been analysing the mid-market buyout segment since 2003. The statistics relate exclusively to majority takeovers by financial investors in which the target company’s management co-invests and which have a transaction value of 50 to 250 million euros for the debt-free company. The data is based on publicly accessible sources as well as on estimates and own research.

Deutsche Beteiligungs AG most active market player in 2013In 2013, the number of transactions recorded declined from 29 to 23; the value of completed deals, totalling 2.3 billion euros, also fell short of the preceding year’s 3.5 billion euros. DBAG structured three MBOs in 2013 (Formel D, Stephan Machinery and Schülerhilfe), making the Company the most active market participant this past year. One notable development is that there were significantly fewer secondary, tertiary or quaternary buyouts: in 2011 there were 15 such transactions, in 2013 merely nine.

Mid-market MBOs in 2013

Target

Vendor

Financial investor

Cartonplast

Synergo SGR

Stirling Square

GHM Group

Günther Oehler, BPE

VR Equity, Bayern LB Capital Partners

Deutsche Fachpflege

Delta Equity

Chequers

Nicko Tours

Ekkehard Beller

Capvis

Formel D

Founding partner

Deutsche Beteiligungs AG

Stephan Machinery

IMA Group

Deutsche Beteiligungs AG

Striko Westofen

BPE

Auctus

Medifox

Company founder

ECM

Wback

Peter Wendeln (Gründer)

Halder

Karl Eugen Fischer

Equita

Equistone

Alloheim

Star Capital Partners

Carlyle

Klenk Holz

German banks

Carlyle

ProAlpha

Leo and Werner Ernst (founders), Beaufort Capital

Bregal

Gesellschaft für Industrieforschung (GIF)

Ulrich Rohs (founder)

3i

Rexroth Pneumatics

Bosch Rexroth

Triton

Bien-Zenker

ELK Group, Erich Weichselbaum, free float

Adcuram

Schuberth Group

Susquehanna International

Perusa

Schülerhilfe

Paragon, Syntegra Capital

Deutsche Beteiligungs AG

Weru

Triton

HIG Europe

Backwerk

Company founder

EQT

Oettinger

Insolvency administrator

Orlando

Competence Call Center

Ardian

Silverfleet

Zellbios

Ergon Capital Partners

DPE Deutsche Private Equity

“In light of the favourable financing terms and thelarge supply of investment funding on the part of financial investors, this market trend is surprising,” said Torsten Grede, Spokesman of DBAG’s Board of Management, commenting on the data today at this listed private equity firm’sannual press conference in Frankfurt am Main. “We attribute that in part to the prices sometimes asked by vendors,” Grede said. “In some cases asking prices and the quality of the company up for sale do not match – financial investors have grown more selective than before the financial crisis.”

Deutsche Beteiligungs AG has also been among the investors with the highest number of buyouts over an extended period of time. From 2004 to 2013, DBAG transacted twelve MBOs (plus two transactions outside Germany and two that slightly exceeded 250 million euros). Only Equistone (formerly Barclays Private Equity) and Odewald & Cie., with 15 and 14 deals respectively, have more transactions to their account.

One out of nine MBOs aimed at settling the succession issueMBOs involving financial investors to resolve the succession issue in familyowned businesses constitute an integral part of mid-market buyouts in Germany (29 out of 260 transactions since 2004). The annualnumber and value of these transactions are, however, constant. This past year, succession prompted three MBOs, including Formel D, an MBO structured by DBAG.

Number and percentage of transactions by types (Mid-market MBOs 2004 - 2013)

Public-to-private transactions (P2P) remain marginal: “Clearly, German takeover law still makes transactions of this kind very complicated for financial investors,” said DBAG Spokesman of the Board, Grede. “This has impeded transaction activity. The situation may change, however, after the latest decision by the German Federal Court of Justice on cash settlements in the event of delistings from the stock exchange.”

Fewer transactions with a value of more than 100 million eurosIn 2013, smaller transactions were the mainstay of the market. Large transactions became less frequent, while the numberof deals at the lower end of the market grew. 18 of the 23 MBOs taking place in 2013 had a value of 100 million euros or less (2012: 16 of 29 MBOs). Most deals have always been in the lower category of mid-market buyouts, i.e., 50 to 100 million euros. They have consistently accounted for over 50 percent of the mid-market segment and, in 2013, even rose above 75 percent.

Number and share of smaller transactions(Value from 50 to 100 million euros)